What happens when government (state or federal) is pathologically hostile to business

This post tells the story of a case on which I worked.  It’s a true story.

Picture this: It’s 2001.  You live in California and you own a small business that consists of you and maybe three to five at-will employees.  Your profits are decent.

One morning, Jane, one of your employees, announces that she’s quitting, effective immediately, and stalks out.  You know — or think you know — your California law, which requires that, when an employee quits, you have her payment ready within three days of her departure.  (That would be Calif. Lab. Code § 202.) You therefore immediately prepare Jane’s final paycheck, covering the two hours she worked before she quit.

One day goes by, but no Jane.  Two days, but still no Jane.  On the third day, you actually drive over to her last known address to drop off the check, only to discover it’s a vacant apartment.  You head back to the office, check still in hand.  Jane didn’t ask that you mail the check to her, nor do you have a current address, so for the time being, you just hold on to it.

On the fifth day after quitting, Jane shows up, grabs the paycheck, and again disappears.  You breath a sigh of relief, thinking you’re finally done with Jane.  If only you knew, the story is just beginning….

A month goes by, and you suddenly get a notice from the California Labor Commissioner telling you that Jane is claiming that you violated California law.  Your crime?  You did not get Jane’s final paycheck to her within three days of her quitting.  Since you had the paycheck ready immediately, and her failure to receive it was solely the result of her own unavailability, you laugh at this charge, thinking you’ve got a slam dunk case.

You show up on the assigned day to argue your case before the Labor Commissioner.  The Labor Commissioner announces that the three day rule means the employee must have the money in hand by the end of the third day — regardless of either your efforts to pay her or her lack of effort to receive the money.  To punish you, the Labor Commissioner imposes statutory sanctions (or “waiting time penalties”) against you, and insists that you pay Jane an amount 27 times greater than the wages she was actually owed.

Shocked by the unfairness of it all, you hire an attorney, who tells you that you’re right — you complied with your statutory duty, and the Labor Commissioner erred.  The attorney tells you that this is indeed a slam dunk case, and that you should appeal it, which means filing an original action in Superior Court.  Sounds good to you….

The case goes to trial.  Jane is represented by the Labor Commissioner, so this is a freebie for her — the people of the State of California, through their tax dollars, are paying Jane’s attorneys fees.  The judge appears confused by the issues and eventually announces what he believes is a Solomonic ruling.  He holds that, despite the statute’s clear language — Calif. Labor Code §  202 explicitly imposes on the employer only the burden of having payment ready, not the burden of ensuring that the employee receives payment — you should have gotten the payment directly to Jane.  However (and this is where the Solomon part comes in) the judge will halve the sanctions award against you.

While miffed at the fact that you couldn’t get the judge to agree with you entirely, you still leave the Court with a light heart — after all, you got the original award against you cut by 50%, which must be viewed as a clear victory.  Au contraire, my innocent California employer.

In 2001 — when these events took place — the attorneys fee statute governing appeals from Labor Commissioner awards imposed attorney fees and costs against a party who appeared before the Court and was “unsuccessful in the appeal.”  (That was Calif. Lab. Code § 98.2(c), repealed.)  However, as of 2001, two California decisions had held that this facially-neutral language didn’t really mean what it said.

Instead, said the two cases, what that facially neutral language really meant was that, if an employee appealed a Labor Commissioner award and bettered his position by even a penny, he was deemed successful on the appeal, so that the employer would have to pay the employee’s (or, really, the tax funded Labor Commissioner’s) attorneys fees.  The contrary, however, was not true.  If an employer appealed a Labor Commissioner award and bettered his position by 99.9999%, but not by 100%, he was deemed unsuccessful.  He therefore still got to pay the employee’s (or, rather, the Labor Commissioner’s) attorney fees.

What this meant for Jane’s employer was that, even though she managed to better her position on appeal by 50% — she still lost!  She still got to pay the Labor Commissioner’s attorneys fees at fair market value.

The situation in 2001 was therefore as follows:  No rational employer could take the risk of an appeal from a Labor Commissioner award, since there was a huge chance that the employer, whether entirely or even partially correct, would still end up with a judgment requiring him to pay something, even a nominal something, to the employee.  (Judges hate giving employees nothing.) If that happened on appeal, the employer will be responsible for the oh-so-costly attorneys fees, fees that were usually far in excess of the underlying wage dispute.

And when you stop and think about it, this perverted reading of a facially neutral statute was a green light to the Labor Commissioner to do some nasty stuff.  Begin with the fact that Labor Commissioner employees are generally unsympathetic to employers.  This non-intuitive, twisted, backwards reading of a facially neutral statute gave these employees an incentive to ratchet up sanctions against employers to ridiculous amounts, because the Labor Commissioner employees knew that the employer couldn’t afford an appeal.  Even if the employer prevailed on the appeal by lowering the sanction to a more reasonable amount, the employer would still be impossibly burdened by the Labor Commissioner’s attorneys fees.

Keep in mind, too, that these attorneys fees were a complete windfall for the Labor Commissioner, since Commission attorneys are automatically paid by the State of California for their efforts.  And last I heard, when they receive attorneys fees from some hapless employer, the Labor Commissioners offices are not refunding the taxpaying citizens in that amount.

Bad as the above-described situation sounds, it actually got worse after 2001.  There was a brief, shining moment in 2002/2003 when the California Supreme Court, in a burst of profound rationality, said that courts couldn’t take a facially neutral attorneys fee statute, and read it to impose disproportionate burdens on employers.  (That moment of common sense was brought to you by Smith v. Rae-Venter Law Group (2002) 29 Cal. 4th 345.)  That was too good to last, of course.

Here’s the “got worse” part:  In 2003, the California legislature announced its explicit intention to overturn Smith v. Rae-Venter.  The current version of the fee shifting statute now gouges the employer in no uncertain terms: “If the party seeking review by filing an appeal to the superior court is unsuccessful in the appeal, the court shall determine the costs and reasonable attorney’s fees incurred by the other parties to the appeal, and assess that amount as a cost upon the party filing the appeal. An employee is successful if the court awards an amount greater than zero.”  (See Calif. Lab. Code §  98.2(c).)

There is now no possibility of another Smith v. Rae-Venter decision helping hapless employers.  The Legislature has declare in no uncertain terms that the employer can avoid paying the employee’s attorneys fees (read, “the Labor Commissioner’s fees”) only if the employer walks out of Court owing the employee nothing — and obtaining that outcome, especially in liberal courts in the Bay Area or L.A., is a pretty big risk for any small employer to take.  This means that employers simply have to swallow the cost when a greedy employee manages to get the ear of a Labor Commissioner who believes it’s fine to impose disproportionate sanctions against a hapless employer, so as as that sanction will benefit a “downtrodden” employee.

Why does this sad story matter?  It matters because this little bit of social engineering — unknown to most people — is driving business out of California.  I personally know of at least two businesses that have just packed up and moved to other states precisely to avoid these kind of hidden costs.  Those oh-so-clever judges misinterpreting the law before 2002, and the “compassionate” Legislature enacting unfair laws in 2003, all think their good intentions say it all.  They truly believe they’re insulating poor, downtrodden employees from the risk of attorneys fees.

What they’re not thinking about, though, is the fact that these employees will be even more downtrodden when businesses keep pulling out of California, leaving the State without enough jobs — and the government without enough taxpayers to run itself.

There’s a reason I’m telling this story today:  it’s because the problem I’ve described above is not limited to the state level.  The National Labor Relations Board has held that Boeing cannot build a plant in South Carolina:

In a stunning move well beyond the scope of their legal mandate, the Obama Administration appointee controlled National Labor Relations Board is suing Boeing Corporation for, get this, building a second production line for their new Dreamliner passenger plane in South Carolina rather than in Washington state.

[snip]

South Carolina is a right to work state whose voters this past November overwhelmingly amended their state’s constitution to ensure that a worker has the right to vote on whether they want to be represented by a labor union. The workers at the Boeing plant in South Carolina have also taken the bold step of booting out the union that represented them, effectively ending the International Association of Machinists and Aerospace Workers stranglehold on Boeing production.

Now, Obama’s NLRB is attacking Boeing’s job creation in South Carolina as “union retaliation” directly related to a 2008 labor strike which crippled Boeing’s production in Washington state.

Now that those state governments that are in thrall to unions and labor have made it virtually impossible to do business in State A, the federal government is upping the ante by making it illegal for a business to move to State B.  I’ll reiterate here what I often say:  The Left may call them corporate fat cats or “rich people,” but I call them employers.  When you make it impossible for them to do business, they’re going to leave.  And if you make it impossible to leave, they’re going to die on the vine, leaving both State A and State B without jobs.

Cross-posted at Right Wing News

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Comments

  1. Danny Lemieux says

    The Left may call them corporate fat cats or “rich people,” but I call them employers.  When you make it impossible for them to do business, they’re going to leave.  And if you make it impossible to leave, they’re going to die on the vine, leaving both State A and State B without jobs.

    Except in Country A or Country B, of course. I understand that Brazil has an excellent airplane manufacturing environment. 

  2. Danny Lemieux says

    I suppose that it could be worse, though. For example, Boeing could have manufacturing plants in California and headquarters in another true-blue labor state like Illinois, for example.

    Uh…wait a minute…oops!

  3. says

    As you can see, it’s all interconnected. No member of the Leftist alliance is an island, just minding its own business, with their own turf and corruption deals. It’s all connected from the local level, to the municipal level of the state legislature, to the national congress. They’re all in on it together. Because they’re all getting something out of it.

    When people see Leftist malfeasance, they like to think it’s just a single person, or a minority, or a local matter. But it isn’t. They’re all connected and communicating with each other.

  4. says

    I just had another conversation with two Jehovah’s witnesses. It was a much shorter one, since I told them that I had been visited before a few/many weeks ago. They gave me the same pamphlet sheet on how there are many truths and resolutions to problems in the world. As well as a paper bound “What does the Bible really teach”.

    I, of course, put on my usual Y stream of monologue thesis statement and justifications on what I believe and think about true belief, strength of will and heart, and such. Probably bored them to tears, so they promptly left.

    It was a husband and wife team this time, both in their early 20s or late 30s. Dark toned skin, whether natively American or natively African I never asked. I’ve known a few husband and wife teams in my ongoing quest to search out human perfections and imperfections. The husband is usually the leader and spokesman, the person up front. (Yes, Yes, I know, Ymar’s whole Total Body Language perception thing going on again, but be patient) Jason was to my right, his left, and slightly forward and said most of the things. I’ve noticed that as well, even in the two female teams. There is one dominant lead that is the designated speaker, since they do it well, and the other one is for… I don’t know, security? They have a car that checks up on them, yet they don’t drive it into my driveway. A good security check, but not up to my standards. I would have everyone doing Witness work trained in H2H… (okay, okay, I’ll stop talking about H2H combat before I go further into the deep)

    I opened up with the confident, non-threatening body posture of two hands linked behind my back. Curiously, I cannot seem to remember exactly what else I was doing, but I tried to avoid the arms crossed posture as that indicates negativity or disagreement. When I began talking about how I respected, regardless of whether I agreed with their beliefs, how they were willing to work and meet with people who may not like them, simply because of what they saw as the truth. When I said that the proof of their beliefs were not upon their words but upon (motioning to the arms/skin) their actions and said that this was (putting my right fist on my heart) true strength of heart, I think I got a reaction from the woman with the round, attentive face and beautiful looking wife. It was from her eyes or her body language, cannot be sure. It was a gut instinct that showed she reacted to that one.

    Back when I first began to be interested in human psychology, I would never have believed that after comprehending the various problems of humans, that there were so many ways to raise up their morale and spirit. Many things that I thought that were permanent psychological scars and wounds were anything but. It’s the philosophy of soft and hard, ying and yang. The power to destroy and the power to create. The power to injure and the power to heal. Both are simply opposite faces of the same coin.

    The world needs missionaries and people like the Jehovah’s witnesses. I have my own ideas of what it takes to save the world, but they are more than welcome to try it their way. Certainly their way is far less bloody then my own preferred ideal solutions.

  5. says

    There are many reports of Christian missionaries being killed or attacked in the world.

    To be honest, I know why. They are out there trying to do something of lasting worth, but they don’t carry military training or ruthless combat experience. 

    I think I said for most of us here when I say that if Islamic death squads tried attacking those in the US military or in the US civilian sphere that knew how to defend themselves, a different and more positive result would be had. We may even look forward to it as being “fun”.

    I would, personally, find it immensely satisfying to see the look on a jihadist’s face when he realizes that his killing techniques are in fact, not as good as he thinks they are.

  6. Charles Martel says

    Ymarsakar, I would also like to see the look on his face when he reaches paradise and realizes that the babes in Allah’s brothel have already been picked over by Mohammed.

  7. says

    The Islamic mentality is that they get a free license so long as they fight against evil (using jihad). This mirrors the Leftist “ethical standard” that no matter who they rape, how many children they kill, or even how many children they rape then kill, it is all FORGIVEN if they savage the Enemy (which is us).

  8. Charles Martel says

    Wow, Danny! Leave it to you to find a link to the best portrait ever taken of Fatima, the Head Houri of Heaven. She is said to be the most beautiful babe there. So beautiful, in fact, that not a single one of the 65,387,901 men who have been with her have ever expressed a desire to be with any of her sisters.

  9. SADIE says

    After reading the article I am convinced that Dan Brown or Bookworm should get to work on a new title:
     
    The Di-Business Code. Briefly, the story would find the source of the Wholly Fail. These codes aren’t laws – they’re a business Inquisition.

  10. Danny Lemieux says

    “…not a single one of the 65,387,901 men who have been with her have ever expressed a desire to be with any of her sisters.”

    I think they were terrified into submission. Which is what Islam is all about, when you think about it.

  11. jj says

    And so we come back to my old question, with yet another example: is it time to indulge in a few years’ of dictatorship?  Yet again, the government is moving in an area “well beyond the scope of their legal mandate.”  So – whom does Boeing call?
     
    As regards California – hopeless, and the list of reasons not to live there is approaching the length of my leg.  (I am 6’3″ tall.)
     
    But I do have an amusing story that is somewhat apposite, from an old family friend who in his day was the president of the NY Bar Association, and closed his career on the federal bench for some years.  He was a very bright guy, wickedly funny, and pretty much despised lawyers.  He had an interesting take on how court should work when he was presiding, which was that, contrary to much of the legal system he didn’t give a good goddam about case law, and wasn’t interested in hearing citations – because he didn’t care about them.  He once told me: “when you come into my courtroom don’t cite at me, and tell me about other people’s BS.  I don’t care about other people’s BS, they’re not in front of me.  I have the law, I know what it says, and all I care about is your BS on it – that I’ll listen to.  Don’t tell me some case that somebody decided in the direction you favor on October 12, 1955, because I don’t know what that means.  That judge could have been drunk at the time, he could have been drugged, he could have been out of his mind, he could have been bought and paid for by the side in whose favor he found – we don’t know.  All we know is that on October 12, 1955 he bought into this guy’s BS rather than the other guy’s, and left his clerk some notes that were probably 85% illegible to come up with a nice-sounding reason for it in a decision.  Then by the time he got around to signing what his clerk wrote for him (and we’re all nice enough to pretend was “his” decision) he probably didn’t even remember what the hell he was reading any more.  Well, I don’t regard that as even being interesting, let alone providing me a direction to dispose.  So I don’t care about it, and don’t want to hear about it.”
     
    I thought that was pretty interesting.  Makes sense to me, too.  Of course, an attitude of sticking to the law and only the law – as written – and bypassing the BS would put 90% of the judges out of business – evidently all of ‘em in Crazifornia – but maybe it’s time for that.  Or past time.

  12. jj says

    I should, of course, have mentioned that I’m probably not quoting precisely what he said, the words may not be exact.  They are, however, very close and 100% in the spirit of what he said.  And are probably more than 3/4s direct quote, because I was sufficiently amused that I’ve always remembered it.

  13. Charles Martel says

    jj, your comments reminded me of the 19th-century pastime of selling tickets to watch collisions between old locomotives that were about to be junked. They’d get two engines up to speed, the engineers (young lads) would jump off, and the spectators would yell and scream as the behemoths closed in on their fiery denouement.

    Of course it took showmen a while to work out the proper distnace between collisions and spectators, but once that was settled, Engine Gotterdammerung became quite the thing.

    I mention it because I’m trying to think of a great vantage point for watching the collapse of California from a comfortable distance. Most likely it will be on Nob Hill or Pacific Heights in San Francisco where Democratic swells, surrounded by the best unionized cops that the taxpayers can buy, can watch the distant plumes of riot smoke in Oakland and Richmond, all the while sipping petulant Paso Robles pinots and bemoaning the GOP’s refusal to fund ghetto abortion mills.

    My only problem is figuring out a way to charge admission to the event. Considering that the folks in question have already pillaged my purse, perhaps I can run a scam. I would be open to suggestions as to how I might inveigle my moral and intellectual superiors into handing me back some of my money.

  14. says

    Not all of them but a substantial portion. I also have the same outlook on arguments. If people have an argument, they should put it out themselves in complete sentences, rather than relying on exterior authorities that aren’t present to speak for themselves, cites or other people’s decisions.

    That’s why Z is lawyer material. He’s already got the fundamentals of argument by indirection down.

    Lawyers are supposed to be advocates and inherently biased for or against. They’re not supposed to be this conspiracy of like minded con artists that are all scheming together, the left hand absolutely confident in what the right hand is doing.

  15. Charles Martel says

    Ymarsakar, the left does not admit to the existence of right hands. What you meant to say was “the left hand absolutely confident in what the other left hand is doing.”

  16. says

    Reference wise, Jehovah’s witnesses do not believe there is a Hell or Heaven, that they are in fact lures brought on by “other religions” to do the work of the devil in conning people who have lost loved ones to do the bidding of evil.

    Well, I can certainly attest to the power of a heaven or the fear of a hell can certainly motivate humans to do interesting things.

  17. JKB says

    Well, the hostility seems to be going all around.  Perhaps there was a mad plan by the Lefties to capture the coastal states.   Here is a nice story about environmentalists in Washington working at the county permitting level opposing the lawful export of Montana coal to China by impeding the construction of a port facility. BTW, I was just reading over at neo-neocon about the college writing teacher’s conference.  I found this comment, although not surprising to anyone here to be amusing: —————– Sergey Says:  April 23rd, 2011 at 3:37 pmMy cousin works as a schoolteacher in Southern California, only as replacement when regular teachers are sick. Once he said to her class that they must study harder to get a good job when they grew up. The students complained that she was “terrorising” them. She was reprimanded by principal for such non-PC behavior and warned that they will fire her if get a new complaint. ——————————— “Mommy, teacher said I had to study hard to get a good job, make her stop!”  Used to be, such a teacher would get a reward not a threat of firing.

  18. SADIE says

    JKB
    After reading the tale from Sergey, the future looks bleak.
     
    With apologies to T.S. Eliot
     
    This is the way the world endsThis is the way the world endsThis is the way the world endsNot with a bang but whiners.

     
     

  19. says

    Engine Gotterdammerung….reminds me of a story about a guy who was applying for a job as a train dispatcher:
     
    Interviewer: So we have a single-track line and you realize you’ve mistakenly cleared two trains going in opposite directions on the same segment of track. There are no signals, switches, or sidings on the track between, and you have no way to communicate with the train crews. What would you do?
     
    Candidate: I’d go get my brother.
     
    Interviewer: Why would you go get your brother?
     
    Candidate: Because my brother ain’t never seen a train wreck.

  20. says

    Lacking the courage of their convictions, Leftist alliance members, politicians, and bureaucrats are not seeking to make business operate fundamentally different. The Left just wants their cut of the profits and believes their parasitism is naturally the cost of doing “business” on their turf. Many businesses disagree and even if they did not, they cannot afford to pay the protection racket costs plus their own fixed production costs. So next time a Leftist or LibProg tells you that they’re making these laws to protect employees or poor people from the rich, you can know immediately that this is a sham, that the real truth is that they are just protecting their extortion racket and their own personal bank accounts.

    For too long the Left has hidden behind the fig leaf called “social justice” and the Republican spinelessness that masquerades around as polite solidarity (with Dems).

    Calling the Dems a vast organized crime syndicate would be a poor insult to real organized criminal networks. Criminal networks are composed of the desperate and those enslaved. The Left are composed of people who had a choice, with no legal or citizenry barriers to success, and yet they chose the path of evil. The Left is organized evil backed up by alliances of criminal networks to launder the cash. Unlike a criminal enterprise, their chief motivation is not profit but power and control. They are much as the Spanish conquistadors.  Money served as the primary motivation, yes, but their chief goal was much grander then that. Criminal networks usually do not take the risks of being discovered or being too dispersed in territory. The Left, however, has an endless ambition and craving for national conquest and enslavement. It is not enough that they own Chicago and New Orleans. It is not enough that they have enslaved the inhabitants of Los Angeles and Harlem. It is never enough for them. They need more. More wealth to be looted, more resources to conquer, more people to enslave. Such is the nature of unbridled evil. There is no end, no compromise, no “deal” that can be made to stop it.

    You can’t move your business out of California because the union presence in S Carolina is not good enough to be able to extort money from the business. You can’t contest the law because the Left owns the law, the lawyers, and the judges used to execute and interpret the law. In the meanwhile lawyers will make money off of re-interpreting the law for their own benefit while unions are aided by the laws the lawyers have now re-interpreted. It’s all of one piece, a single alliance composed of different ideologies and groups. People see one group and they are like, “oh this is just one problem facing us”. It is not, it is the entire Left. You contest the unions, and you bring down the wrath of the lawyers as well. They are all of one piece. There is no need to differentiate them because they’re working together. This is not Iraq where you can differentiate anti-Americans from patriotic Iraqis, give asylum to the latter and kill the former. It’s not that simple. Counter-insurgency was never that simple, but it is even more complex in America.

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  1. [...] economic activity and kill the Golden Goose? This week’s winning essay by Bookworm Room entitled What happens when government (state or federal) is pathologically hostile to business examines that subject in micro and macro. Kafka isn’t even in the running. Here’s a slice: On [...]

  2. [...] the results for the previous week. First place in the Council category was Bookworm Room’s What happens when government (state or federal) is pathologically hostile to business. If conditions in California are really as bad as this, Californians should be very [...]

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